Correlation Between Westrock Coffee and Citizens

Can any of the company-specific risk be diversified away by investing in both Westrock Coffee and Citizens at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Westrock Coffee and Citizens into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Westrock Coffee and Citizens, you can compare the effects of market volatilities on Westrock Coffee and Citizens and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Westrock Coffee with a short position of Citizens. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westrock Coffee and Citizens.

Diversification Opportunities for Westrock Coffee and Citizens

-0.38

Correlation Coefficient

Westrock Coffee  Citizens

Very good diversification

The 3 months correlation between Westrock and Citizens is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Westrock Coffee and Citizens in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens and Westrock Coffee is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Westrock Coffee are associated (or correlated) with Citizens. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citizens has no effect on the direction of Westrock Coffee i.e., Westrock Coffee and Citizens go up and down completely randomly.

Pair Corralation between Westrock Coffee and Citizens

Given the investment horizon of 90 days Westrock Coffee is expected to generate 6.66 times less return on investment than Citizens. But when comparing it to its historical volatility, Westrock Coffee is 1.37 times less risky than Citizens. It trades about 0.03 of its potential returns per unit of risk. Citizens is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  304.00  in Citizens on September 2, 2024 and sell it today you would earn a total of  144.00  from holding Citizens or generate 47.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Westrock Coffee  vs.  Citizens

Westrock Coffee

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Westrock Coffee are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Westrock Coffee may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Citizens

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Citizens sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Westrock Coffee and Citizens

The main advantage of trading using opposite Westrock Coffee and Citizens positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westrock Coffee position performs unexpectedly, Citizens can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Citizens will offset losses from the drop in Citizens' long position.

The idea behind Westrock Coffee and Citizens pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.